S&P downgrades U.S. credit rating

August 8, 2011 at 11:52 am

Markets continued to fall sharply today following Standard & Poor’s downgrade of U.S. debt, lowering the credit rating from AAA to AA+. S&P continued their downgrades by lowering ratings for Fannie Mae, Freddie Mac, and several Federal Home Loan Banks. Boston University economics professor Laurence Kotlikoff weighed in with his view of S&P’s move to lower the U.S. rating. Speaking to the Boston Herald, he said:

“You add it all up, our bond rating shouldn’t be AA+, it should be CCC at this point. I’m not kidding…It’s a scary mix of ingredients…If the market drops any more, this could lead to a double-dip. At some point, all hell can break loose on our bond market. If people realize how broke the country is, they may start dumping bonds. This could be a catalyst and interest rates would shoot up. Bank assets would drop and banks would start to fail. People might panic and take money out of their money-market accounts.”